Smaller Agencies Driving M&A: A Shift in the Marketing Agency Landscape

The marketing services merger and acquisition (M&A) market is witnessing a significant transformation as smaller agencies take centre stage, driving increased volume and momentum in deal activity. While reports of larger agency deals continue to make headlines, it is the smaller firms that are generating substantial competition and advancing the M&A landscape in 2026. According to Tony Walford of Green Square, this shift became particularly noticeable as the market closed out 2025 and moved into the new year.

In past years, significant acquisitions often dominated discussions, primarily involving major network and private equity (PE)-backed agency groups. Yet, the last year has seen a fundamental change in the types of buyers participating in the market. As larger networks focus on addressing their internal challenges—ranging from AI impacts to margin improvements—clients are gravitating towards more agile, creative small firms that operate without the constraints of legacy frameworks.

As the market dynamics evolve, Walford notes that an array of new agency startups looms on the horizon, leading to the formation of collectives. These groups, such as Beyond and Harbour, enable smaller agencies to collaborate and offer a wider range of services to meet diverse client needs, all while maintaining their distinct identities and independence.

The current landscape is marked by a notable distinction between the acquisition activity of large and small agencies. The trend shows that the real volume of M&A deals is occurring within smaller firms—those that generate up to £10 million in revenue and have fewer than 100 employees—rather than the larger entities that command higher deal values but involve a narrower buyer pool.

A pattern is emerging where the deals involving smaller agencies are not only more frequent but also increasingly competitive, driven by a diverse array of buyers. Firms aiming to acquire smaller agencies include strategic acquirers, PE platforms, bolt-on vehicles, entrepreneurial buyers such as Common Interest and Brave Bison, and even passive financial investors. The interest in available agencies valued below £15–£20 million is markedly higher due to the wider buyer universe, underscored by demand that exceeds supply in this segment, consequently driving up both pricing and transaction activity.

Once agencies venture beyond the £5 million EBIT level, the circumstances change considerably. The pool of potential buyers becomes restricted, typically involving larger PE funds and a handful of global strategic groups capable of undertaking such transactions. This constraint naturally leads to a decrease in transaction frequency, despite the potential for higher individual deal values.

Another crucial factor influencing this M&A landscape is the rise of entrepreneurial buyers, who now play a pivotal role in the acquisition of smaller agencies. Previously, agency purchases were predominantly dominated by large PE firms or holding companies, but the entrance of these entrepreneurial buyers reflects a broader trend where agencies are perceived as accessible, asset-light, cash-generative, and resilient investment opportunities. This provides a fertile ground for heightened competition among buyers targeting smaller firms, specifically those generating between £1 million to £3 million in EBIT.

However, it is essential to note that firms with sub-£1 million EBIT, particularly those that heavily rely on a limited client base or operate in competitive markets, may find it challenging to attract high-value buyers. Such agencies often struggle to justify premium valuations amid concerns of inherent risks.

The complexities inherent in larger transactions pose additional hurdles. The integration of larger firms is often laden with complications that arise from various factors, including layered management structures, international operations, and legacy client bases. These factors contribute to longer due diligence cycles and higher risks associated with integration, making transactions at this level less appealing to many potential buyers. In contrast, smaller agencies exhibit traits of agility that foster rapid decision-making and straightforward cost structures, contributing to quicker transaction velocities.

Moreover, narrative clarity serves as a compelling driver for M&A activity. Buyers prefer agencies that possess a well-defined proposition, whether that involves a specific vertical focus or specialised capability. Smaller firms are often better equipped to convey this message effectively, whereas larger entities might present a diluted narrative resulting from their expansive service offerings and past acquisition strategies. The ability to articulate a clear value proposition directly influences deal-making, enabling prospective buyers to swiftly assess compatibility and move forward with confidence.

In summary, the marcomms M&A landscape is clearly witnessing a reorientation, with the central gravitational force shifting toward smaller firms. The convergence of a broader buyer landscape, the surge in entrepreneurial demand, and the operational simplicity associated with smaller agencies are redefining what constitutes a viable acquisition target. For agency founders, this demonstrates that exit opportunities hinge more on factors like focus, profitability, and narrative clarity than on sheer headcount. As such, the smaller end of the market is now setting the pace for M&A activity, even if the most substantial deals continue to capture the spotlight.

Source: The Drum